HISTORY - Family Firm Institute - FFI
SOME HISTORYSo you want to be a family enterprise professional, or you are thinking about it. Either way, if you decide tojoin this growing professional community, here are some things you might want to know. For example, familiesin business can be found in all cultures, in all periods of history, in literature, in drama, and in economicanalyses of gross domestic product in countries around the world. While it may be safe to assume that suchenterprises always had advisers of some sort, it was only at the end of the twentieth century that a distinctlynew profession of family business adviser emerged.Sometime in the late 1980’s, and mostly in the US, the term‘practitioners’ was coined to refer to family business advisersand consultants who worked primarily with families whohad operating businesses. The term “adviser”refers primarily to people who still worked in thecore disciplines of law, finance, management orbehavioral science, often having family-ownedcompanies as a part of their overall practice. Theterm “consultant” was used to describe thosewho no longer worked in the core discipline, butwho worked directly with the family to createa governance plan, advise on education forupcoming generations, and manage the team ofadvisers in place.As the field grew and more and more familybusiness researchers and educators emerged,the term ‘family enterprise professional’ wasexpanded to include all four groups, i.e., advisers,consultants, university-based educators andacademic researchers. At the same time, the exclusiveuse of ‘family business’ morphed into ‘family enterprise’to include individuals and organizations who work with,educate, and research multi-generational families of wealthwho might have family offices, holding companies, familyfoundations, etc.2
CORE DISCIPLINESIdentifying the core disciplines related to working with family enterprise was key to developing the field andstructuring the skills and expertise needed for professionals practicing in the field.FINANCIALMANAGEMENTBEHAVIORALLEGALHow professionals from one of these core disciplines work with a family enterprise is often determined by theirprofessional perceptions. For example, an attorney may view the issues involved with a family enterprise only(or mainly) from a legal perspective, an accountant from an accounting perspective, and so ISEMANAGEMENT
Despite these different perspectives, all four core disciplines deal with a number of recurring issues that spanprofessions including: Roles and boundaries within the family enterprise Intergenerational relationships Conflicts and disputes Visions and values Succession planningFor example, consider ways in which the four professions may deal with conflict: Lawyers by creating or revising agreements, or through negotiation, litigation, tax or estate plans Financial advisers by creating or revising financial or estate plans Management science by recommending changes in decision-making procedures, compensation, andteam building Behavioral science through individual or group therapy, coaching stakeholders to deal more effectivelywith elements of the enterprise system, and developing effective communicationsHowever, as the field has grown, so too has the sophistication of family enterprises who now expect morefrom their advisers than technical solutions. Instead, family enterprises are seeking the following from theiradvisers: Comprehensive advice vs. products Broad, as well as deep, knowledge More openness and knowledge of the ‘soft side’ Multidisciplinary teams with someone to coordinate and integrateSo, it follows that those entering the field need to consider a variety of topics to work effectively with theseunique clients.4
CHARACTERISTICS OFFAMILY ENTERPRISE PROFESSIONALSIn “Characteristics of Effective Family Business Advisors,” published in FFI Practitioner (Volume 2,August 2006), the authors discuss a study conducted with top experts in the field of family enterpriseto determine the most important characteristics of a family enterprise professional. The following list ofcharacteristics were ESSIONAL-DEVELOPMENTAPPRECIATIONLISTENING IRNESSVALUE/ETHICS5
Three of these characteristics were given top priority as being most helpful for professionals working withfamily enterprises: systems thinking, listening, and empathy.In a Family Business Review article, “The Most Trusted Advisors and the Subtle Advice Process in FamilyFirms,” (FBR, vol. 26, 3: pp 293-313., July 17, 2013) the author identifies how advisers capture attention,how they become attuned to family firm members to influence attention, and how they aid family membersto collaboratively interrelate and mindfully govern the firm in order to facilitate an environment of collectiveattention.The study found that the Most Trusted Advisers (MTAs) share the following. They:Have attributes to capture attention.Namely, Voice and Weight. Voice – self-awareness; true to his/her values; trustworthy; have the best interest of the familyand business at heart Weight – depth of competency; past experience with family firms and breadth of competencyUse attuning ability to influence attention.This is the subtle process that MTAs use to become attuned to family members. Self in relation to others – understanding how group members relate to one another Self in contribution to the whole – providing independent objective advice; acting with suspicioustrust; quarterbacking; encouraging multiple advisers Decision bias to others – accepting and supporting the decisions and goals of the familyAre skilled at facilitating collective attention.MTAs facilitate an environment that connects family members with one another. Collaborative interrelating – MTAs help family members work together through (1) helping familymembers develop their own competencies, (2) helping family members focus on what is goodfor the group, and (3) helping the family make decisions together Mindful governance – MTAs encourage family members to slow down, stop, reflect, and thinkabout the various consequences of decisions6
ROLES OF THEFAMILY ENTERPRISE PROFESSIONALAs you can see, there are many roles that a family enterprise professional may be called upon or choose toperform in the course of an engagement with a client family. Here are a few that are frequently required.CoachTransitional object for changeteach new ways of communicating, setting personalthat the professional be able to remain calm andand career goals, and determining whether thesemanage his/her own feelings during the changegoals are compatible with the goals of the familyprocess, while encouraging the client, and beingbusiness. A coach may also provide leadershipavailable for support and encouragement. In ordertraining and assist with problematic relationships,to employ this ability to identify and manage thekeeping boundaries between family and businesseffect of the family’s strong emotional pull, familyclear. Coaching also involves referrals to otherenterprise professionals learn to use the genogram,professionals, such as a therapist, career counselor,a valuable tool, first for themselves and then for theor financial adviser.families they are working with. This role requiresAs coach, the professional works with individuals toConflict manageran ability to differentiate between normal anxietyassociated with change and signs of pathologicalIn this role, the professional works with members ofreactions. For example, if during the successionsmaller groups in the family or business who haveprocess the founder’s anxiety increases, this isthe most difficulty working together, or who arenormal. If, however, during this process there aretrapped in a conflict that blocks the work. This effortclear signs that the succeeding generation is unablewill include dialogue building, conflict resolution,to take over, or the founder continues to sabotagenegotiations, and improving communications.the process by staying actively involved in work, the‘Container’ or holding environmentprofessional must be more than a transitional objectbut must take an active role in helping the familyIntroduced by DW Winnicott, who studied the naturebusiness find solutions. For example, he or sheof the mother/child bond, the ‘holding environment’might assess whether the successors are capable ofprovides a balance of safety and challenge, oftaking over and willing to do so; or he or she mightprotection and vulnerability for the infant. Eventually,help the owner to let go and move on.the child internalizes these elements and developsa robust sense of self. Key to healthy development,with implications for the ability to grow, learn, work,and love, is the quality of the holding environment.To provide this, the professional must be able totolerate ambiguity and anxieties while the systemand the individual change.7This role is similar to that of ‘container’ and requiresTeacherThe family enterprise professional teachesthroughout the process. At one of the first meetings,a short teaching module on the uniqueness of afamily business and some of the statistics of successand failure help to normalize the situation and assist
the family to see that they are not as unusual as theyabout disagreements. This could be by majority vote,fear. The three-circle model is useful for familiesconsensus, whoever is most affected decides, and soto see the complexity of their situation. Teachingon. An agreed-upon process for managing conflictsand education is an integral part of the entirecan be a foundation for solving the larger issues ofconsultation, from issues of healthy communications,management transition and company ownership.fair compensation, and how to run a family councilmeeting, to setting up a board of advisers oraddressing the needs and concerns of non-familyChallenging the family’s way of perceivingproblems and proposing solutions.business managers.This might include regular family council meetings,Criticto conduct effective meetings, and making fairThe professional must ask tough questions—onesthat open communications. Introducing this conceptat the outset is essential. The family should becautioned that critique is a part of the process, aswell as creating a safe, structured environmentin which to discuss the difficult issues. Circularquestions are a variation on this technique. A circularquestion encourages systemic thinking, exploringexecutive management meetings, learning howdecisions. By establishing agreed-upon ground rulesfor interactions, the family will begin to solve theirown problems. Creating structuresStructures are an integral part of the consultationprocess. They can provide security and predictabilityfor rebuilding the trust that is necessary forinterconnections and interactions.agreements and consensus. Building and enforcingProcess policeand business – generates healthier interactions,As soon as work starts with the client, and theprofessional has established trust and a set ofground rules for interaction between family members,structures in each of the systems – family, ownership,enforces healthy boundaries, and offers methodsand mechanisms for planning, solving problems,and managing conflict. The ongoing dialogue,he/she continues to help the client by:negotiations, compromises, exchanges of ideas, and should sustain both the firm and the family overClarifying communicationsFor example, each person speaks for him/herselfand differentiates between what they think, what theyfeel, and what they know for a fact. The professionalmay initially repeat what he/she has heard eachcollaboration between the family and the businessthe long term. These mechanisms may include an‘off-line’ conflict coaching session, a dialogue duringthe meeting with coaching from the professional, orstopping the conflict with a “deal with that outside theindividual saymeeting” admonition. In the ownership system, the In the business system, performance reviews forEncouraging a positive problem-solving approachFor example, if there is a disagreement, the familydecides at the first meeting how to make decisions8 structures may include an outside board of directors.family members and fair compensation mechanismsare other examples.
CORE COMPETENCIES NEEDED FORFAMILY ENTERPRISE PROFESSIONALSTo perform these roles and/or meet the expectations of the sophisticated client, there are certain corecompetencies that should be part of the professional’s expertise. These can be learned over time and, in allcases, ongoing learning is required.Systems thinkingSystems thinking is about creating structures to manage the interactions between and among systems. Itinvolves working with multiple levels of the client system and the complex web of relationships. The family’sreality has been constructed over time by its interplay and interactions. As family members learn how to buildnew ways of dealing with each other, they develop more effective methods of solving problems. Much ofthe professional’s work consists of building structures, processes, and procedures, such as family councils,family employment policies, shareholder agreements, and codes of conduct to manage and monitor theinteraction between the systems. It involves creating healthy boundaries, not barriers, between the familyand the enterprise.Process/contentIn working with family businesses, the professionals must be able to provide information as well as managethe change process. Content and technical expertise and knowledge of change management is neededto work with family enterprises. The professional must know the difference between process and content,understanding the importance of each, and use both as the situation requires. For example, the professionalworking with a business family must be able to answer specific questions about the estate plan, transfer ofownership and management issues in the succession process, as well as manage and guide the changeprocess. Most change efforts in family businesses are not likely to succeed unless there is an appropriatecombination of content and process, creating outcomes as well as process improvement.Multidisciplinary team approachTeams are often useful when working with family enterprises, as no single professional posesses all thecontent information and process skills necessary to solve every potential conflict or problem. Improvementsto the technical side, such as defining a sound estate plan or clear roles and responsibilities, promotehealthier relationships that in turn support good business practices. It is unrealistic to expect that anyone professional will be able to understand all the complexities of estate planning. But it is critical thatprofessionals, when working with family businesses, understand the tax consequences of not having anestate plan, or the potential family consequences arising from the structuring of trusts and the selection oftrustees. ‘Process’ consultants, such as organization development consultants and family therapists, shouldhave familiarity with corporate and governance structures, and financial terminology. ‘Technical’ consultants,such as accountants and lawyers, should be familiar with key psychological issues, such as familydevelopmental life cycles and the impact of crises on family dynamics.9
MODELS OF TEAMSFamily enterprise professionals come to the field from a variety of professional backgrounds, especially law,finance, behavioral science, and management science. Each of these professions has a body of knowledgethat provides its practitioners with expertise that is critical to helping family enterprises. The complexitiesof family businesses can overwhelm those who have worked independently. Nonetheless, since clients areincreasingly expecting their advisers to work as a team, it is important that family enterprise professionalsunderstand and master the benefits of the team approach.There are several models of teams. These models depend on the level of coordination, the members’commitment to the team, and how often and how they work together. There can be: Accidental interaction – advisers who meet and connect only through the client, and coordinate theirefforts only in their work with that particular client Dysfunctional interaction – advisers unknown to one another, even if working with the same client, withno coordination A consulting (interdisciplinary) team – a pre-existing team that is hired by the client A collaborative (multidisciplinary) team – advisers from different disciplines who meet, get to knoweach other’s work, and bring one another into client situations on an as-needed basis, or in a ‘shadow’consulting function10
Despite the recognition that multidisciplinary teams offer more comprehensive advice, they also posechallenges. Team members must deal with the following questions before beginning their work together: Who will direct the team’s activities? Who will see that the work is coordinated? How will the billing be handled? How will differences of opinion be managed? Who will liaise with the client? How will the client be sold on the team? How will competition for the best idea or the best recommendation be dealt with? How will everyone find the time necessary to plan for the tasks of team maintenance as well as meetingthe client’s needs?The ethical issues of each profession will also need to be addressed. Here are a few examples of questionsthat might be raised by each adviser on the team: Lawyers may ask: Who is my client? Therapists may ask: What are the issues of confidentiality? What are the boundary issue? Advisers from financial fields may ask: What are the financial priorities and how do they fit into the familypriorities and values? How are the intangible assets of the family included in the valuation? Everyone may ask: What are the consequences of my advice on the other areas of the family businesssystem? For example, what are the consequences of my legal advice on family dynamics?11
SPECIALIZED EDUCATION FOR FAMILY ENTERPRISE PROFESSIONALS:PEER LEARNING VS STRUCTURED LEARNINGThe term ‘peer learning’, first coined by social scientists, has had a variety of meanings. In the developmentof the family enterprise professional it typically implies a reciprocal, a two-way (or more), learning activity.Peer learning can be mutually beneficial and involves the sharing of knowledge, ideas, and experienceamong the participants. It can be described as a way of moving beyond independent to interdependent ormutual learning.Early champions of the field, such as the Family Firm Institute, Inc. (FFI), were committed to peer learninglargely for two reasons: 1) there was no reliable research, and 2) the experiences of practitioners with theirclients was a way to create the field and develop research questions that would lead to a formal recognitionof multi-generational family enterprise advising as a legitimate professional activity.Today peer learning remains an element of building a personal development plan. However, creating socialnetworks and sharing best practices is only part of professional education in the field. As family enterprisepractitioners and researchers encounter more global and more complex family companies, it becomesincreasingly important that peer learning opportunities should be coupled with curated, vetted educationalprogramming. To this end, the Family Firm Institute created structured learning programs and began offeringcertificate programs for family enterprise professionals as early as 2001 and more recently, in 2011, FFIlaunched its Global Education Network (GEN) program. FFI GEN is the product of more than 30 years ofpractice and research in the field. The program is unique in that it provides students with trusted, time-testedknowledge and skill development using a multidisciplin
In “Characteristics of Effective Family Business Advisors,” published in FFI Practitioner (Volume 2, August 2006), the authors discuss a study conducted with top experts in the field of family enterprise to determine the most important characteristics of a family enterprise professional. The following list of characteristics were identified:
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